^^e^ 


T 


J^^iur:)^MYi^^^^^ 


THE  EUROPEAN  WAR  AND  OUR  . 
OPPORTUNITY    IN    FOREIGN     TRADE 


Address  by 


WILLARD/ STRAIGHT 


Bcfote  the 


Illinois  Manufacturers*  Association 


Chicago,  Illinois,  October  27th,  1914 


NEW  YORK 
1914 


THE  EUROPEAN  WAR  AND  OUR 
OPPORTUNITY  IN  FOREIGN  TRADE 


Address    of   Mr.    Willard    Straight    before     the     Illinois     Manufacturers* 
Association,  Chicago,  Illinois,  October  27th,  1914. 


It  is  a  privilege  to  be  able  to  meet  and  to  be  permitted  to 
address  the  members  of  the  Illinois  Manufacturers  Association. 
Your  progressive  spirit  and  the  interest  in  foreign  trade  which 
prompted  you  to  send  a  delegation  to  study  South  American 
conditions  will,  I  am  sure,  result  to  your  own  profit,  just 
as  your  example  already  has  been  beneficial  to  the  entire 
country.  The  able  report  on  South  American  banking  and 
credit  made  to  the  Government  by  the  Chairman  of  your 
Foreign  Trade  Committee,  Mr.  Hurley,  contains  information, 
and  is  published  at  a  time,  which  will  render  it  one  of  the  most 
valuable  contributions  ever  made  to  the  literature  of  the  com- 
merce of  South  America. 

Mr.  Glenn,  your  Secretary,  in  inviting  me  to  be  present  on 
this  occasion,  suggested  that  you  would  expect,  perhaps,  a 
discussion  on  Far  Eastern  trade  conditions.  I  shall  be  pleased, 
in  so  far  as  I  am  able,  to  answer  any  questions  you  may  to- 
day care  to  ask  regarding  this  subject. 

At  a  time  such  as  this,  however,  one  is  tempted  to  search 
for  the  fundamentals  of  a  problem  rather  than  to  elaborate  on 
any  of  its  phases.  At  the  risk  of  appearing  here  under  false 
pretenses,  therefore,  I  will  not  touch  upon  the  commercial  or 
political  situation  in  the  Orient,  but,  if  you  will  permit  me  to 
do  so,  shall  attempt  to  analyze  our  general  foreign  trade  prob- 
lem as  affected  by  the  European  war. 

Prior  to  the  outbreak  of  hostilities  in  Europe,  the  pressure 
of  increasing  production  in  this  country  and  the  enactment 
of  a  competitive  tariff  had  forced  some  of  our  merchants  and 
manufacturers  seriously  to  consider  the  possibility  of  widening 


••»  #^  y>  r>  /-~>  ^-v 


their  markets.  The  terms  of  the  Federal  Reserve  Act,  permit- 
ting the  estabhshment  of  branch  banks  abroad  and  making 
provision  for  the  creation  of  a  discount  market  for  commercial 
paper  in  this  country,  promised  some  of  the  financial  facilities, 
the  absence  of  which  has  handicapped  our  people  heretofore, 
while  to  the  popular  imagination  the  opening  of  the  Panama 
Canal  marked  the  inauguration  of  a  new  commercial  era,  and 
aroused  an  increasing  interest  in  the  possibilities  of  developing 
our  foreign  trade. 

Despite  the  broad  views  and  the  keen  appreciation  of  our 
needs  on  the  part  of  some  of  our  great  manufacturers,  mer- 
chants, bankers  and  railway  men,  and  the  efforts  of  organiza- 
tions such  as  the  Illinois  Manufacturers  Association,  and  the 
Chicago  Association  of  Commerce,  however,  the  mass  of  our 
people  and  the  majority  of  their  representatives  in  Washington, 
have  believed  that  we  in  this  country  were  very  little  concerned 
with  world  commerce  and  the  questions  of  international  politics 
arising  therefrom.  The  producers  of  our  great  staples — 
grain  and  cotton — realized  perhaps  that  their  goods  were 
destined  eventually  to  go  abroad,  but  their  experience  was 
confined  to  their  relations  with  middlemen  and  bankers  who 
purchased  and  financed  their  crops  for  delivery  at,  and  ship- 
ment from,  the  seaboard. 

The  war  has  been  responsible  for  a  great  awakening.  Our 
friends  in  the  southern  and  central  states,  who  have  heretofore 
little  heeded  the  fact  that  their  real  markets  were  not  Phila- 
phia  or  Galveston,  New  Orleans  or  New  York,  have  suddenly 
found  their  interests  directly  affected  by  the  conflict  on  the 
other  side  of  the  Atlantic.  Grain  shipments  have  been  de- 
layed, complicated  by  difficulties  regarding  settlement  due  to 
moratoria,  or  questions  of  exchange  or  neutrality.  The  bumper 
cotton  crop,  instead  of  being  a  blessing  to  the  South,  has  be- 
come a  pressing  national  problem.  Manufacturers  who  have 
depended  upon  materials  or  articles  imported  from  abroad, 
have  found  it  impossible  to  obtain  supplies  necessary  for  the 
continuance    of   their   industries.     Producers,    farmers,    mer- 


chants  and  manufacturers,  who  for  years  past  have  been 
deaf  to  the  agitation  for  the  up-building  of  an  American 
Merchant  Marine,  are  now  conscious  for  the  first  time  that 
shipping  facilities,  regarding  the  existence  of  which  they 
were  comparatively  indifferent  but  on  which  they  nevertheless 
relied,  are  of  vital  import  to  the  entire  country.  Bankers  who 
have  been  innocent  of  any  knowledge  of  foreign  exchange  are 
now  rather  resentfully  aware  that  credit  is  an  international 
commodity  and  the  maintenance  of  normal  exchange  rela- 
tions with  Europe,  particularly  with  London,  has  a  direct 
bearing  upon  their  day  to  day  transactions. 

This  situation  has  produced  a  nation-wide  realization,  rather 
than  an  appreciation,  that  the  United  States  has  a  certain, 
well-defined  place  in  the  mechanism  of  world-trade,  and  as  a 
natural  corollary  has  evoked  a  general  feeling  that  since  our 
competitors  are  handicapped  by  the  European  struggle  the 
United  States  should  have  a  splendid  chance  to  supply  the 
demand  hitherto  filled  by  European  exporters.  During  the 
past  two  months,  therefore,  we  have  heard  great  exultation 
over  the  wonderful  opportunities  for  the  extension  of  American 
commerce,  and  much  enthusiastic  comment  as  to  the  possibili- 
ties of  capturing  British  and  German  trade. 

As  a  matter  of  fact,  aside  from  the  sudden  demand  for  mili- 
tary supplies,  which  has  brought  large  orders  to  some  of  our 
industries,  the  great  proportion  of  our  merchants  and  manu- 
facturers actually  engaged  in  foreign  trade  have  found  their 
sales  decreased,  rather  than  increased,  by  the  war.  Exchanges 
have  been  disorganized ;  shipping  was  for  a  time  interrupted  and 
is  now  carried  on  under  rather  abnormal  conditions,  and  mora- 
toria  have  actually,  or  in  effect,  been  declared  on  every  side, 
making  collections  extremely  hazardous.  The  urgent  question 
at  the  present  time,  therefore,  is  not  the  extension  of  our  com- 
merce but  the  retention  of  that  which  we  heretofore  have  had. 

The  Administration  at  Washington  with  commendable 
promptitude  has  endeavored,  as  far  as  possible,  to  meet  the 
■emergency.     Congress  has  adopted  measures  designed  to  en- 


4 

courage  American  owners  to  transfer  to  American  registry, 
ships  heretofore  operated  under  foreign  flags.  A  Government 
Bureau  for  war-risk  insurance  is  already  in  operation  and  under 
the  auspices  of  the  Treasury  Department  bankers  have  been 
and  are  attempting  to  relieve  the  exchange  situation  by 
underwriting  the  New  York  City  notes  and  the  establishment 
of  a  gold  pool.  Plans  are  now  being  discussed,  with  the 
patriotic  cooperation  of  Chicago  bankers,  which,  it  is  hoped, 
will  enable  the  Southern  farmers  to  cany  that  portion  of  the 
cotton  crop  which  they  are  unable  to  export  because  of  the  war. 

American  Branch  Banks  Abroad. 

Even  before  the  outbreak  of  hostilities,  the  National  City 
Bank  had  decided  to  open  branches  in  South  America  and  this 
institution,  in  so  far  as  it  has  been  able,  has  granted  accommo- 
dation to  our  merchants  engaged  in  the  South  American  trade. 
National  banks  which  have  signified  their  intention  of  entering 
the  Federal  Reserve  System  are  now  permitted  to  accept  bills 
of  exchange  and  an  earnest  effort  is  being  made  to  facilitate 
trade  movement  by  the  gradual  creation  of  a  discount  market. 

There  has  been  a  pressing  need  for  the  establishment  of  a 
direct  dollar  exchange  with  South  America  and  the  Far  East. 
It  was  proposed  to  establish  a  merchants'  clearing  house  for 
matching  South  American  credits,  in  the  hope  that,  by  virtue 
of  this  mechanism  we  might  be  able  to  settle  for  our  large 
purchases  of  South  American  goods  by  increased  exports  to 
that  region,  rather  than  by  transmitting  funds  or  goods  to 
Europe  to  liquidate  our  South  American  balances  as  has  here- 
tofore been  the  practice. 

The  suggestion,  however,  upon  careful  investigation  was 
found  to  be  impracticable.  Our  exporters  to  South  America 
and  the  Far  East  are  hampered,  therefore,  not  only  by  the 
difficulty  of  making  collections,  but  by  the  impossibility  of 
securing  adequate  accommodation  in  this  country  from 
American  banking  institutions,  while  importers,  who  have 
heretofore  settled  through  Sterling  credits,  have  been  penalized 


by  the  prevailing  price  of  London  exchange,  or  greatly  em- 
barrassed by  the  moratorium  in  England. 

The  present  emergency,  however,  cannot  continue  indefi- 
nitely. Our  Export  trade  may  be  materially  lessened;  it  is 
inconceivable  that  it  should  entirely  cease.  As  the  situation 
more  nearly  approaches  normal,  therefore,  trade  will  tend 
to  revert  to  its  old  accustomed  channels,  or  will  continue  to 
avail  itself  of  such  new  facilities  growing  out  of  present  needs  as 
may  economically  justify  their  permanent  operation. 

Eminence  of  Sterling  Exchange. 

It  is  folly  to  hope  that,  as  some  enthusiasts  have  predicted, 
the  United  States  will  soon  become  the  financial  center  of  the 
world  as  the  result  of  the  war.  London  has  held  this  position 
for  many  years.  Commercial  bills,  covering  imports  from, 
and  exports  to,  every  comer  of  the  globe,  are  accepted  by 
London  houses  and  discounted  in  the  London  market.  China, 
Japan,  Australia,  South  Africa  and  South  America  have  been 
developed  chiefly  by  British  capital  and  must  each  year  pay 
their  toll  of  interest  settlements  in  London.  British  merchants 
are  everywhere;  British  ships  on  every  sea,  and  although  the 
necessity  of  maintaining  gold  reserves  and  settling  balances  by 
gold  shipments  still  persists.  Sterling  exchange,  not  gold,  in 
reality  to-day  constitutes  the  credit  basis  for  the  world's  trade. 

There  are  undeniable  advantages  in  the  maintenance  of  one 
world  credit  center.  It  may  be  disastrous,  however,  to  be 
without  supplementary  credit  machinery  which  may  be  used 
in  times  of  emergency.  Therefore,  while  we  shall  undoubtedly, 
as  in  the  past,  continue  in  the  future  to  transact  a  large 
portion  of  our  foreign  business  by  means  of  Sterling  credits, 
there  would  seem  to  be  a  chance  at  the  present  time  to  build 
up  exchange  relations  which  may,  to  a  certain  extent  and  for 
a  certain  proportion  of  our  trade,  render  us  independent  of 
London  credits  and  the  London  discount  market.  This, 
however,  cannot  be  done  in  a  day,  or  a  week,  a  month  or  a  year. 
It  will  require  the  development  of  an  American  international 


banking  system,  a  thorough  study  of  foreign  credit  conditions 
and  commercial  custom,  and  the  education  of  our  own  mer- 
chants and  manufacturers  in  business  methods  with  which 
they  are  now  generally  unfamiliar. 

Characteristics  of  Our  Foreign  Traee. 

Our  foreign  trade  should  be  classified  in  two  general  divisions; 
First,  our  trade  with  Europe,  which  is  mainly  made  up  by  the 
exchange  of  raw  for  manufactured  products,  although  a  consid- 
erable portion  of  this  trade  consists  of  both  the  import  and  ex- 
port of  finished  articles,  and.  Second,  our  trade  with  the  rest  of 
the  world  which,  it  may  generally  be  said,  consists  of  the  export 
of  manufactured  goods  and  the  importation  of  raw  products. 
The  balance  of  our  trade  with  Europe  is  heavily  in  our  favor. 

The  balance  of  our  trade  with  South  America,  Turkey, 
India  and  Japan  is  against  us.  They  must  all  make  large 
payments  in  London  each  year.  While  taking  into  consideration 
European  investment  in  American  securities  the  annual  remitt- 
ances of  aliens  in  the  United  States  to  foreign  countries  and  the 
expenditures  of  American  tourists  abroad,  it  may  be  generally 
stated  that  our  trade  balance,  favorable  as  far  as  Europe  is 
concerned,  unfavorable  as  regards  the  rest  of  the  world,  in 
a  way  offset  each  other.  In  other  words,  that  our  large  excess 
of  exports  to  Europe  is  in  reality  utilized  to  meet  our  own 
obligations  and  the  interest  payments  due  in  London  from 
certain  other  borrowing  nations  to  which  we  ourselves  are 
indebted. 

Our  attention  has  been  directed  toward  overseas  commerce 
chiefly  owing  to  our  desire  to  stimulate  production  in  this 
country.  Many  of  our  present  troubles  are  due  to  the  fact 
that  we  have  been  inclined  to  concern  ourselves  only  with 
the  problem  of  production,  not  as  a  segment  in  the  cycle 
of  foreign  trade  but  as  an  end  in  itself.  We  have  in  consequence 
neglected  the  very  vital  question  of  distribution. 
,  Foreign  owned  and  operated  transportation  and  ordinary 
commercial  banking  facilities  have  been  available  and  although 
it  has  been  frequently  asserted  that  American  commerce  should 


not  pay  toll  to  such  foreign  bankers  and  shippers,  the  majority 
of  our  manufacturers  and  merchants  have  been  content  to 
let  well  enough  alone. 

It  was  to  be  expected  that  the  war  would  interfere  with  our 
trade  with  the  belligerent  nations.  Our  dependence  upon 
London  exchange,  however,  has  in  addition  seriously  pre- 
judiced our  sales  to  South  America  and  the  Far  East,  with 
which  regions,  had  proper  facilities  existed,  we  might  reasonably 
have  hoped  that  our  trade  would  have  increased  because  of 
the  curtailment  or  cessation  of  European  exports. 

The  war,  therefore,  in  addition  to  adversely  aff  ectingproduction 
in  this  country  has  forced  upon  us  an  appreciation  of  the  inti- 
mate interdependence  of  the  three  main  elements  of  foreign  trade 
— Production,  Transportation  and  Financing, — First,  of  pro- 
duction; Second,  of  goods  in  transit,  and.  Third,  of  settlement. 

If  we  really  wish  seriously  and  effectively  to  engage  in,  and 
extend,  our  foreign  trade,  we  must  study  all  the  factors  by 
which  this  problem  is  affected. 

An  American  Merchant  Marine. 

Although  sufficient  bottoms  are  available  at  the  present  time, 
the  complications  regarding  contraband  and  neutrality  have 
demonstrated  the  desirability,  if  not  the  necessity,  of  building 
up  an  American  Merchant  Marine,  the  existence  of  which  would 
have  done  much  to  maintain  uninterrupted  shipping  facilities 
with  Europe  and  have  enabled  us  to  carry  on  our  trade  with 
neutral  countries. 

I  have  no  desire  to  enter  into  a  tariff  argument,  but  unless  I 
am  misinformed,  the  reduction  of  heretofore  protective  duties 
has  been  justified  on  the  general  ground  that  despite  our  high 
cost  of  labor,  we  would,  because  of  labor-saving  devices  be 
able  to  maintain  our  wage  scale  under  a  lower  tariff  and  still 
compete  with  European  industries  and  their  cheaper  labor. 

It  has  been  impossible  profitably  to  operate  vessels  (except 
under  our  coastwise  monopoly)  under  the  American  flag  be- 
cause the  cost  of  labor  left  no  margin  of  interest  return  on 
capital  invested. 


8 

The  present  navigation  laws  are  designed  to  maintain  the 
wage  scale  and  living  conditions  felt  to  be  the  due  of  Americans 
at  sea.  There  are  few  labor-saving  devices  in  steam  navigation 
and,  even  if  there  were,  our  owners  could  not  avail  themselves 
thereof,  because  our  navigation  laws  stipulate  that  they  must 
employ  more,  rather  than  less,  men  than  are  required  to  operate 
foreign  owned  vessels. 

Under  such  conditions  investment  in  steamship  lines  has 
offered  little  inducement  to  American  capital.  Government 
ownership  of  ships  wo  aid  seem  open  to  the  same  objections 
which  have  been  urged  against  ship-sab  sidles.  Those  most  fa- 
miliar with  this  subject  (among  which  number  I  do  not  include 
myself)  therefore  contend  that  the  most  direct  and  practical 
way  in  which  to  create  an  American  merchant  marine  would 
be  to  so  modify  our  navigation  laws  that  American  ship-owners 
may  operate  on  a  labor  cost  which  will  enable  them  to  compete 
with  the  other  maritime  nations. 

Until  we  do  have  a  merchant  marine,  our  export  trade  will 
be  dependent  upon  foreign  bottoms  and,  because  of  British 
preponderance  in  the  carrying  trade,  as  at  the  present  time,  very 
largely  upon  the  ability  of  the  British  Navy  to  retain  com- 
mand of  the  sea. 

American  Discount  Market. 

Our  system  of  commercial  banking  for  foreign  trade  should  be 
greatly  altered  and  greatly  improved  by  the  operation  of  the 
Federal  Reserve  Act  and  the  creation  thereunder  of  a  discount 
market  for  foreign  bills  of  exchange.  The  maintenance  of 
this  mechanism  is  so  essential  and  you  are  so  familiar  with 
its  purposes,  that  I  shall  not  venture  upon  a  discussion  thereof. 
I  shall,  if  I  may,  however,  refer  particularly  to  the  importance 
of  governmental  credits  and  foreign  loans. 

The  financing  of  the  transition  from  the  producer  to  the 
consumer  is,  in  the  case  of  ordinary  commercial  transactions, 
handled  automatically  as  a  matter  of  banking  routine.  The 
purchaser  may  settle  at  once  or  arrange  for  sixty  or  ninety 


days, — or  perhaps  six  months — credit  from  the  merchant, 
and  the  merchant,  in  turn,  is  either  "  carried  "  by  his  bankers 
or  by  the  manufacturer  who  would,  in  the  latter  case,  also  be 
obliged  to  rely  upon  the  bank  for  the  necessary  accommodation. 
When  the  purchaser,  however,  desires  credit  for  a  period  of 
from  five  to  sixty  years,  it  is  no  longer  an  ordinary  banking 
transaction;  and  it  becomes  necessary  for  him  to  obtain  funds 
by  the  sale,  on  the  market,  of  stocks  or  bonds  rather  than  by 
discounting  commercial  paper. 

In  other  words,  the  purchaser,  instead  of  obtaining  credit 
from  the  merchant,  the  manufacturer  or  the  banker,  through  the 
banker  as  his  agent,  borrows  from  the  investing  public. 

Foreign  Loans  Make  Foreign  Trade. 

Most  of  the  countries  which  are  now  rapidly  developing  their 
resources  and  which  cannot  themselves  finance  such  develop- 
ment, must  secure  money  in  this  way.  If  we  expect  to  realize 
the  full  possibilities  of  our  export  trade,  we  must,  by  our  readi- 
ness to  purchase  foreign  bond  issues,  be  able  to  extend  to  foreign 
purchasers  the  accommodation  which  they  now  have  obtained 
in  the  markets  of  our  competitors. 

This,  roughly,  is  the  problem  of  the  foreign  loan  and  foreign 
trade.  Its  satisfactory  solution,  which  is  of  vital  interest  to 
our  merchants  and  manufacturers,  depends  primarily  upon  the 
attitude  of  the  American  investors  who,  while  they  may  not 
directly  benefit  by  the  increased  sale  of  particular  American 
commodities,  will,  in  addition  to  the  return  on  their  investment, 
share  in  the  ensuing  general  prosperity. 

A  distinction  should  be  drawn  between  foreign  securities, 
purchased  solely  as  an  investment  and  foreign  loans  which,  in 
addition  to  their  investment  value,  bring  to  the  lender  certain 
collateral  advantages.  Under  the  first  classification  should  be 
included,  for  example,  railway  bonds  or  stocks,  issued  in  the 
United  States,  but  purchased  in  Europe  for  investment  or  for 
speculative  purposes.  In  the  same  category  would  fall  bonds 
issued  by  the  Russian,  Spanish  or  other  Governments,  which. 


10 

though  politically  and  financially  independent,  have  required 
for  their  development  larger  amounts  than  they  themselves 
are  able  to  supply. 

Foreign  holders  of  such  bonds  or  stocks  have  not  attempted  to 
share  in  the  management  of  the  American  railway  corporations 
and  have  been  powerless  to  control  the  action  of  the  Russian, 
Spanish  or  other  Governments,  whose  needs  they  have  financed. 
Such  loans,  therefore,  are  judged  according  to  their  investment 
value. 

Under  the  second  classification  would  fall,  loans  issued  on 
behalf  of  a  foreign  government  or  corporation  in  the  markets 
of  the  bankers  who  negotiate  the  loan  and  which,  besides  the 
interest  return  to  the  actual  subscriber  thereto,  assure  certain 
political  advantages  to  the  Government,  or  returns  to  the 
industry,  of  the  lending  nation,  which  are  shared  directly  or 
indirectly  by  the  investing  public. 

Peaceful  Influence  of  Investment 
France,  Great  Britain,  Germany,  the  United  States,  Belgium, 
Switzerland  and  Holland,  have  been  the  chief  lending  nations. 
Switzerland  and  Holland  have  been  concerned  primarily  with 
investing  their  surplus  capital.  The  British,  German  and 
Belgian — even  the  Russian  and  Japanese — and  particularly 
the  French,  Governments,  however,  have  in  the  past  recog- 
nized the  value  of  their  investing  power  as  a  political  instrument 
in  the  great  diplomatic  struggle  in  which  all  have  been  engaged 
to  secure  markets  for  their  foreign  trade. 

A  highly  efficient  mechanism  of  economic  production  has 
only  a  potential  value.  The  aggressive  strength  of  a  nation 
depends  on  its  political  and  financial  stability,  and  its  inter- 
national position  upon  its  investing  power  and  the  disposition 
of  its  government  effectively  to  represent  its  citizens  or  sub- 
jects and  to  assist  in  the  extension  of  their  trade. 

The  great  lending  nations  have  recognized  both  these  facts. 
They  have  utilized  their  investing  power  as  a  national  asset. 
By  building  up  weaker  nations  through  financial  reorganization 


11 

and  the  development  of  their  resources,  they  have  created 
for  themselves  a  financial  and  political  influence  which  they 
have  converted  to  their  commercial  advantage.  In  this  task 
Government,  ankers,  merchants  and  manufacturers,  sup- 
ported by  the  investing  public,  which  the  Government  repre- 
sents, and  of  which  the  bankers,  merchants  and  manufacturers 
are    an  integral  part,  have  cooperated  for  the  common  good. 

United  States  Market  for  Foreign  Securities. 

The  United  States,  at  the  present  time,  is  the  only  country 
with  fully  developed  banking  facilities  and  great  financial  re- 
sources, not  involved  in  the  European  war.  Some  of  the  belli- 
gerent governments  have  already  attempted  to  sell  their 
securities  in  this  country,  it  being  understood  that  the  proceeds 
of  such  sale  would  be  deposited  here  for  the  purchase  of  supplies 
in  the  United  States.  But  upon  the  cessation  of  hostilities  the 
question  of  governmental  credits  and  foreign  loans  may  well 
become  acute,  for  at  that  time,  it  is  not  at  all  unlikely  that  a 
number  of  the  European  nations  may  attempt  to  obtain  funds 
in  the  United  States. 

The  American  public  has  not  heretofore  purchased  foreign 
securities  to  any  great  extent.  The  interest  awakened  by, 
and  the  information  acquired  as  a  result  of,  the  war,  however, 
and  the  interest  return  which  capital  will  command  at  its 
conclusion,  may  render  our  people  more  inclined  to  widen  their 
investment  field. 

Dollar  Exchange. 
The  opening  of  branch  banks  in  South  America  and  the  Far 
East,  by  making  possible  the  establishment  of  a  dollar  exchange 
and  the  creation  of  commercial  paper  which  should  find  a 
market  in  this  country  when  the  provisions  of  the  Federal 
Reserve  Act  become  operative,  should  greatly  facilitate  our 
trade.  Our  ability  to  build  up  new  markets,  however,  will 
depend  upon  the  readiness  of  our  investing  public  to  furnish 
capital  for  the  development  of  our  customers.    American  in- 


12 

vestors  in  loans  to  European  powers  or  to  Japan  would  derive 
merely  their  interest  return.  There  would  be  no  collateral 
benefits  to  the  country  at  large  and  the  funds  obtained  would 
be  utilized  by  the  borrowing  nations  in  building  up  the  very 
industries  with  which  our  own  manufacturers  must  compete. 
We  should,  therefore,  now  begin  to  consider  whether,  when  the 
proper  time  comes,  we  will  utilize  our  loaning  power  to  assist 
the  recovery  of  our  competitors  or  to  build  up  customers  in 
South  America  and  the  Far  East,  where  the  interest  to  be 
earned  would  be  attractive  to  us  and  at  the  same  time  fair  to 
the  borrowing  nations. 

Post-Bellum  Readjustment. 

The  readjustment  which  will  follow  the  present  struggle  will 
doubtless  place  the  European  nations  on  a  stable  basis  which 
will  be  maintained  at  least  for  many  years  to  come.  Our  in- 
vestors, therefore,  may  feel  a  confidence  in  the  position  of 
European  countries  and  Japan,  which  they  may  not  consider 
justified  in  the  case  of  China  and  some  of  the  South  American 
republics  which  now  require  funds.  Russia,  Chile,  Brazil  and 
the  Argentine,  however,  will  need  money  for  their  development 
and  should  offer  attractive  fields  for  American  investment, 
and  promise  large  returns  for  American  industry  if  loans  are 
granted  on  condition  that  the  proceeds  be  expended  in  the 
purchase  of  American  goods. 

The  willingness  to  loan  funds  to  China  and  certain  of  the 
Latin-American  Republics,  however,  will  depend  largely  upon 
the  American  investor's  confidence  in  the  readiness  of  our  own 
Government,  not  to  act  as  their  collecting  agent,  but  by 
diplomatic  good  offices  to  support  them  in  case  their  interests 
should  be  imperiled. 

Attitude  of  Government. 
At  the  Foreign  Trade  Convention,  held  in  Washington  last 
May,  the  Secretary  of  State  said  in  part  as  follows: 

"It  is  the  earnest  purpose  of  the  Department  of  State  to 


13 

promote  commerce  and  close  industrial  relations  with  other 
countries.  So  far  as  it  is  possible  to  do  so,  it  is  our  desire  to 
obtain  for  Americans  equality  of  opportunity  in  the  develop- 
ment of  the  resources  of  foreign  countries  and  in  the  markets 
of  the  world.  It  is  our  intention  to  employ  every  agency 
of  the  Department  of  State  to  extend  and  safeguard  American 
commerce  and  legitimate  American  enterprises  in  foreign  lands 
so  far  as  it  can  be  done  consistently  with  the  sovereign  rights 
of  other  governments.  It  should  be  distinctly  understood, 
however,  that  this  Government  in  its  efforts  to  advance  the 
interests  of  its  citizens  abroad  will  know  no  favorites.  Honesty 
of  purpose  and  endeavor,  and  ability  to  perform  obligations 
assumed  will  command  at  all  times  its  hearty  support." 

The  assurances  given  were  categorical  and  should  be  satis- 
factory. It  has  been  frequently  asserted,  however,  that  our 
Government  has  failed  to  support  the  interests  of  American 
investors  in  Mexico,  and  this  has  been  advanced  as  an  argument 
against  any  purchase  of  foreign  securities.  The  Mexican  situa- 
tion is  not  yet  settled.  Critics  of  the  Administration,  theiefore, 
are  not  yet  justified  in  stating  that  its  final  solution  will  not 
result  in  the  satisfaction  of  just  claims  and  in  the  establishment 
of  relations  between  the  United  States  Government  and  the 
Republics  of  Mexico  and  Central  America  which  will  warrant 
investors  in  loaning  their  capital  for  the  development  of  these 
regions. 

Above  all,  however,  if  we  are  to  be  successful  in  extending  our 
foreign  trade  we  must  think  nationally  and  act  nationally; 
settle  our  own  differences  between  ourselves;  present  a  united 
front  to  the  world  and  bargain  collectively  with  our  customers. 

The  tariff  should  be  recognized  as  an  instrument  to  protect 
American  industry  at  home  and  as  a  diplomatic  currency  to 
be  expended  in  return  for  concessions  calculated  to  secure  for 
us  access  to  fresh  markets  abroad. 

Increased  Investing  Power 
It  should  be  realized  that  our  investing  power  will  be  in  the 
future,  by  comparison,  greater  than  ever  before,  and  we  should 


14 

regard  it  in  the  aggregate  as  a  national  asset,  to  be  utilized  for 
the  benefit  of  the  United  States  as  a  whole,  as  well  as  for  the 
profit  of  the  individual  investor. 

Our  Government  should  not  be  called  upon  to  protect  our 
fellow-Americans  who  desire  to  exploit  our  neighbors,  but  sup- 
port for  legitimate  enterprises  abroad  should  be  assured. 

Great  wars  have  almost  invariably  served  to  stimulate  in- 
dustry. It  is  ridiculous,  therefore,  for  us  to  believe  that  our 
competitors  will  be  handicapped  permanently  by  the  conflict 
in  which  they  are  now  engaged.  On  the  contrary,  they  who 
are  already  trained  to  foreign  trade,  who  have  long  established 
connections  abroad  and  a  just  appreciation  of  the  relations  of 
oversea  commerce  and  domestic  prosperity,  will  be  stimulated 
to  new  efforts,  by  the  pressing  need  of  recovering  from  the 
effects  of  the  present  struggle.  They  will  be  disciplined  by  the 
trials  they  have  undergone;  hardened  by  deprivation;  rendered 
keener  by  the  present  crisis.  Within  but  a  short  space  of 
time  their  competition  will  be  more  effective  because  more 
aggressive.  They  will  be  satisfied  with  a  smaller  margin  of 
profit  and  will  be  willing  to  work  harder  than  before. 

We  in  this  country  have  been  prodigal ;  thoughtless,  careless, 
because  of  the  very  magnitude  of  our  national  resources. 
We  have  developed  a  remarkable  initiative  and  intelligence, 
because  the  scope  for  our  enterprise  has  been  so  vast.  We  are 
as  a  nation,  however,  just  beginning  to  learn  the  necessity  of 
thinking,  not  individually,  but  collectively,  of  cooperating  for 
the  common,  instead  of  striving  each  for  our  own,  good. 

A  great  foreign  trade  opportunity  is  to-day  presented  to  us. 
We  are  not,  however,  invited  to  enter  an  El  Dorado.  There  is 
no  "  New  West  "  opening  to  our  endeavors. 

Our  competitors  are  less  active  than  they  have  been  in  the 
past.  They  will,  for  some  time  to  come,  be  handicapped  by 
the  results  of  the  war,  but  their  recovery  from  its  effects  will 
be  more  rapid  than  some  of  us  are  now  led  to  believe. 

Our  real  opportunity  lies  in  our  suddenly  awakened  con- 
sciousness; that  after  all  we  cannot  hold  aloof  but,  whether  we 


15 

will  or  no,  must  play  our  part  in  a  world  game.  The  war 
has  granted  us  a  breathing  spell  in  which  to  look  strange 
new  facts  in  the  face;  to  take  stock  of  our  abilities,  to  over- 
haul the  existing  and  to  construct  new  machinery  for  carry- 
ing on  our  foreign  trade.  The  European  struggle  has  not 
brought  us  a  lottery  prize;  it  has  given  us  a  job  in  which  it 
is  up  to  us  to  make  good.  This  is  our  foreign  trade  oppor- 
tunity. It  is  an  opportunity  which  carries  heavy  responsi- 
bilities,— responsibilities  which  you,  gentlemen  of  the  Illinois 
Manufacturers  Association  have  already  shown  your  desire 
and  your  ability  to  assume. 


RETURN  TO  the  circulation  desk  of  any 

University  of  California  Library 

or  to  the 

NORTHERN  REGIONAL  LIBRARY  FACILITY 
BIdg.  400,  Richmond  Field  Station 
University  of  California 
Richmond,  CA  94804-4698 

ALL  BOOKS  MAY  BE  RECALLED  AFTER  7  DAYS 
2-month  loans  may  be  renewed  by  calling 

(510)642-6753 
1-year  loans  may  be  recharged  by  bringing  books 

to  NRLF 
Renewals    and    recharges    may    be    made    4    days 

prior  to  due  date 

DUE  AS  STAMPED  BELOW 


SEP  07 


ssr 


AlIC    '^  n  1QQR 


U.  C.  BERKELEY  LI 


CDM7fl3H' 


596880 


UNIVERSITY  OF  CALIFORNIA  LIBRARY 


^^'-'S.',  v-;>;t V?  'ii-"^  ^  ^ 


■Si^'*3» 


